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Economist boosts Womack’s e-tax plan

By Peter Urban

Stephens Washington Bureau

WASHINGTON — Enactment of Arkansas Rep. Steve Womack’s bill to require online merchants to collect sales tax receipts on Internet purchases could boost the economy and create jobs, according to a top conservative economist.

Arthur Laffer says that if the Marketplace Fairness Act that Womack, R-Rogers, has proposed were enacted into law, it could add $563 billion to the U.S. economy and create 1.5 million jobs over the next decade.

“The impact of collecting Internet and remote sales taxes and using additional revenues wisely would be profound,” according to Laffer, a member of President Reagan’s Economic Policy Advisory Board in the 1980s.

Arkansas’ economy could gain $6.5 billion and create an additional 20,600 jobs, according to Laffer.

The growth would be contingent on state and local officials lowering tax rates to match the growth in tax revenues that would come from having online merchants collect the taxes as is now required of brick-and-mortar retailers.

Wisconsin, for example, has passed legislation that would dedicate “e-fairness revenues” to complimentary reductions in state income taxes. The lower rates, Laffer said, have Wisconsin poised to be “a beacon for pro-growth policies in the Midwest.”

The report was commissioned by the Marketplace Fairness Coalition, which has been lobbying in favor of Womack’s bill. The Senate has approved an e-fairness bill but no action has occurred in the House.

“I’m thrilled by Dr. Laffer’s study and encouraged by the tremendous economic benefits it highlights. So, let’s level the playing field for our brick and mortar retail businesses once and for all,” Womack said.

Womack expects that many states, including Arkansas, would follow Wisconsin’s lead in using the additional tax revenue collected by online merchants to lower rates for all.

“There’s no question in my mind that when Congress passes MFA, more tax cuts will be first thing on our state’s agenda, as well as many others across the country,” he said.

Grover Norquist, president of Americans for Tax Reform, has strongly criticized Womack’s bill saying it is both unfair and unwise.

Norquist argues that state elected officials will see the revenue as found money to spend – giving them less reason to tighten their belts, particularly since those collecting the money have no voice in local elections.

A 1992 U.S. Supreme Court decision said that unless a merchant had a physical presence within a state, the state could not compel it to collect sales taxes.

Congress can change the rule but opponents argue that it would be too onerous for online merchants to comply with sales tax regulations that differ across 45 states that have such a tax.

States now require consumers to pay the uncollected “use” taxes themselves, but few do – costing states an estimated $23 billion in 2012. That figure could double in a decade, according to Laffer.